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Former Islanders co-owner Stephen Walsh seeks reduced prison sentence

Lawyers say Walsh's previous counsel knew a judge who gave him a lengthy sentence was "cognitively impaired" from a stroke but failed to challenge the ruling.

Former New York Islanders co-owner Stephen Walsh, above,

Former New York Islanders co-owner Stephen Walsh, above, leaves federal court in Manhattan in 2014. Credit: Bryan Smith

More than four years after he got a 20-year maximum prison sentence for fraud, a former co-owner of the New York Islanders is trying to get a break by claiming his previous lawyer should have challenged the judge who jailed him based on mental issues from the aftereffects of her stroke.

Lawyers for Stephen Walsh, 74, formerly of Sands Point, an Islanders co-owner from 1991 to 2000, said in a new filing that the late Manhattan U.S. District Judge Miriam Cedarbaum was out for eight months before his 2014 sentencing. Walsh's lawyers believed Cedarbaum was “cognitively impaired” but sat on their hands, according to the filing.

Cedarbaum, who died in 2016 at the age of 86, could have been challenged for removal under the federal Judicial Disability Act, Walsh’s lawyers said, and his family is prepared to push for that retroactively if he doesn’t get to withdraw his guilty plea or receive a resentencing.

“Walsh’s family, which has paid out thousands and thousands of dollars for Mr. Walsh’s defense, wishes to file a challenge,” the lawyers wrote. “Hopefully that challenge will not be necessary, if this Court grants relief, not only for the disability, but for counsel’s failure to deal with it.”

Walsh was accused in 2009 of carrying out an alleged $50 million investment fraud with partner Paul Greenwood, also a former Islanders executive, using a fraudulent sales pitch as what then-U. S. Attorney Preet Bharara called a “moneymaking machine” to finance a lavish lifestyle.

The alleged victims of their fraud included charities, universities and pension plans. Walsh used stolen money to pay a divorce settlement and provide money for his children’s businesses, while Greenwood bought expensive stallions and collector teddy bears, according to charges.

After pleading guilty, Walsh and defense lawyer Michael Tremonte proposed 18 to 24 months in prison. When Cedarbaum settled on 20 years, it produced gasps from Walsh’s family, and the judge even offered to consider letting him withdraw his plea after the unexpectedly harsh sentence for a white-collar case.

That ultimately never happened. Cedarbaum later sentenced Greenwood to 10 years. An appeals court later reversed the sentence because the judge mistakenly thought individuals lost money. Greenwood was resentenced by another judge to five years, but Walsh had waived any appeal in his plea deal.

Scheduled to be in custody until 2032, Walsh began his bid to overturn his sentence by challenging the work of his lawyers in 2017, and this week’s motions followed a hearing U.S. District Judge Loretta Preska held last month to take testimony from Walsh, Tremonte and others.

Walsh lawyers Vivian Shevitz and Susan Kellman said Tremonte admitted he had concerns about Cedarbaum — best known for giving prison time to home design mogul Martha Stewart in an insider trading case — both before and during the sentencing, and he should have acted on them.

“As Tremonte testified, no lawyer wants to be in a position to challenge the competence of the judge before whom his client appears,” they wrote. “However, Tremonte represented Walsh, not the government, and not the Court.”

Walsh’s lawyers said he is also entitled to relief because of a series of other errors. Tremonte failed to challenge the government’s calculation of losses from the fraud although investors were all eventually made whole, and didn’t consult with Walsh before declining Cedarbaum’s offer that he could try to withdraw his plea.

Prosecutors are opposing the bid for a new sentencing. They said in court filings that Walsh was a savvy businessman who knew the risks at his sentencing, Tremonte provided effective assistance and “acted reasonably” with regard to Cedarbaum.

Tremonte declined to comment, and court officials did not respond to a question about Cedarbaum’s condition.

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